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Wednesday, March 22, 2006

Mixed Open

Morning News of Note:

KBH: KB Home's Turn...Expect more bad news about the U.S. housing market when KB Home reports quarterly results today. In the annual report it filed last month, the company said it saw more order cancellations in December and January, and fewer net orders than it had in the year-earlier period. That weakness likely persisted into February. Last week the Federal Reserve's "beige book" -- a roundup of anecdotal reports on business conditions gathered by the Fed's regional banks -- pointed to further cooling in the U.S. real-estate market in February. And builders surveyed by the National Association of Home Builders have been ratcheting down their outlook on the business since last summer. (Full Story) WSJ

ESLR: Piper Jaffray comments on China solar tour; says no panacea to poly shortage (14.32 ) Piper Jaffray believes China is likely to be of paramount importance to the solar industry because of its low-cost manufacturing capabilities and potentially enormous domestic demand driven by new government programs. For these reasons, they anticipate that many global solar OEMs are likely to pursue China strategies following the lead of Ersol Solar Energy AG with its JV investment in Shanghai Electric Solar Energy. Conversely, they think many of the Chinese solar OEMs may forward integrate by acquiring installers/integrators in Europe and the U.S. They believe that despite the blossoming low cost and integrated solar food chain in China, and several polysilicon feedstock plants that are under construction, there is no panacea to the current polysilicon shortage. They think solar companies operating in China will play an important role. However given that polysilicon, the major cost driver of solar today (raw poly is 40% of cost), is in short supply with rising prices, they prefer companies that possess technology that reduces (ESLR) or eliminates (ENER) the need for polysilicon. Also, firm views polysilicon suppliers as lower risk solar investments (WFR).

GLW: Corning develops glass free of heavy metals-WSJ Corning (GLW) says its researchers have developed a glass that is free of heavy metals such as arsenic, antimony and barium. This could give the company, which is the biggest maker of glass for LCD televisions, a "marketing edge" in areas with strict environmental regulations. Corning VP Peter Bocko said of the development, "All the LCD glass that's out there today meets all environmental regulations. We're trying to be forward looking and not have to react to new regulations."

STJ BSX MDT: Medicare Says It Will Cover Test For Heart Device...A little-known test that predicts which patients make the best candidates for implantable heart defibrillators has received the nod for federal insurance coverage, a move that could damp the outlook for the hot-selling devices. The noninvasive cardiac test, developed by Bedford, Mass., Cambridge Heart Inc., uses a machine to measure nearly undetectable fluctuations in a person's heartbeat during mild exercise. Yesterday the federal Centers for Medicare and Medicaid Services, or CMS, decided to allow Medicare reimbursement for the $400 test on a national level, boosting prospects for Cambridge Heart, which has been struggling, and bringing some level of closure to a contentious debate about the test's merits. Medicare is the federal-state insurance program for the elderly. Yesterday's decision doesn't extend to Medicaid, the parallel program for the impoverished. (Full Story) WSJ

Market Comments: Stocks open mixed as the SPX is up a bit, and the Nazz is lower on the heels of disappointing news out of Microsoft (MSFT) that it will delay the launch of its much anticipated Vista operating system.

Energy stocks are finally getting a bounce this morning, on news that inventories fell more than expected (EIA data). Bond yields are a little lower, with the 10-year at 4.69%.

Yesterday's market action was short-term bearish, so regardless of how today ends up, we need to be on watch to see if there is any kind of downside follow-through to come.

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About Me

Jordan Kahn, CFA is the Chief Investment Officer of KAM Advisors, in Beverly Hills, CA.
He is a frequent market commentator for numerous investment publications, and has appeared on CNBC and KNBC-Los Angeles. He is a regular columnist for RealMoney.com and has also been featured in TheStreet.com, Street Insight, Technology Investor, and Barron’s.